This is some really weird sh-- and not enough articles are shedding light on this, and since this is the honest hub I would like to know your thoughts on this!
Market Cap of all of TR is 25B as of last year. F&R contributes 54% of TR revenue, hence it should be valued around 13.5B.
So how on Earth was Refinitiv valued at 17B USD!!!??!?!
guys read this article. “The Refinitiv covenants are probably the worst high-yield covenants that I have ever seen,” according to Josefsberg, who has been analyzing debt covenants for 13 years. The details : https://www.institutionalinvestor.com/article/b1bbk5f144z59t/Why-Osterweis-Said-No-to-Blackstone-s-Refinitiv-Deal
@noh the first 3B$ was provided by Canada Pension Fund and Singapore Soverign Fund and Blackstone! I doubt BS put lots of money though!
That said, according to BS track record expect Refinitiv to pay these 3B back before end of Oct 2019. They might sell off some product worth 3B or simply take another loan on Refinitiv behalf and consider it as dividends and pay it back!
the F&R is the real money making stuff , If Refinitv manged it properly 1% of customer retention will make the things better , hope Blackstone will manage better or merge with bloomberg then there is no rival , Monopoly of Refinitv in finance data , feel thats why they branded like Refinitv , seems Reuters tail they removed purposefully means its a headache of trusted principles , SO refintiv can do anything let wait and see always risk are there but if they are able to manage then no need to re think future set .
Just to be clear it was not the bond market that provided the money it was the loan market providing the bulk of the financing. In fact the bond market, in the end, provided less than hoped and more was raised from the loan. This has a number of longer term issues. Loans are floating rate instruments and as The Fed increases rates so the loan gets more expensive. A 25 basispoint increase from The Fed is another $25-30m per annum in interest payments Refinitiv needs to find. I think we can all agree we are in a rising rate environment and the market is currently thinking two more rises by end of Q119, perhaps another 50 basis points. Refinitiv also agreed not to refinance the loans for at least six months otherwise they need to pay a significant penalty to do this. The financing was a blow away sucsess for a number of reasons...the yield offered, the Blackstone name, the massive fees they pay the banks and the massive lack of HY loans issued this year combined with funds sitting on buckets of cash from years of QE.
BS only put in about $3bn of their funds. The rest came from bonds issued. These were offered at an eye-watering interest rate (over 6% p.a.) to be able to attract sufficient investor interest. 6% is a huge amount in the current market. Investors looking for yield were all over it.
These billions of dollars of junk bonds are now Refinitiv debt. Yes, BS used F&R/Refinitiv as collateral for the bonds. Although even as junk bonds, these are particularly junky, with BS retaining some very favourable terms that may bite investors if Refinitiv ever fails to, or looks like it may fail to, pay the coupon.
So the risk is largely with the bond Investors, who are betting that Refinitiv have the revenue to pay the coupon. To meet these huge debt obligations, BS/Refinitiv has to cut costs ASAP. First coupon due soon.
Refinitiv/F&R always has very low growth on the top line. So massive cuts must be made on the bottom line. And quite likely, profitable parts of the business may be sold off (TWeb, Dealing, FXall) entirely to lower debt or return funds to BS (and proportionally, TR)
Once the costs have been taken out, BS will sell their stake (in part or in whole) and recover a multiple of their initial few billion invested. This is their bread and butter business. BS know exactly what they are doing. Their profit, Refinitiv employees pain.
Hi, I will try to answer your question. F&R revenues prior to the sale was ~$6bn. Generally as a benchmark process, a company or unit when sold is usually valued in the range of 1.5-3x of the revenues. The IP&S unit had revenues of ~$1bn and was sold for close to $3bn. However a factor that comes into play when valuing a company is the liabilities that it carries. In this case, I do not know the structure of the deal that black stone has carved to finance the buyout. I do tend to personally view that Refinitiv was seriously over-valued(do note that Thomson still owns 45%) and also due to its margins struggling in the range of 25%-28%. Sales/revenues have been either flat or decline in regions. The ongoing layoffs are also an additional costs that the company has to take on its books plus an additional $300m for reuters news on an annual basis. Black stone have traditionally been very good negotiators in striking deals, but the above factors makes one wonder why black stone did not look into the deal correctly(That 55% may have well been 65% or 70%).
They will spin off the bits they don’t see as key and take a profit and pay down debt.
I’m well chuffed, the end of pointless bs business cases that prop pump out where everything is a top strategic priority and will generate millions c-ap has to stop. If all these business cases that cost millions had worked we would be at 5-7% a year growth.
@nco hats off if BS manages to pull this off!
Perhaps a bit of different thinking may be applied? Many in the market speculate that several divisions will be sold off and the company focus becomes data and analytics. A data and analytics company that is exceptionally lean with growth and improved margins. The combinations of the sales of divisions today and the sale of a leaner Refinitiv later, may well add up to much more than $17bn.
When the Thomson family were offered $17 billion for 55% of F&R the dollar signs must have spun before their eyes.
Yet I read David Thomson even thou he voted “For” was against the deal and wanted more $$$.
I didn’t consider NTA, but if it validates the number, then we will be against a huge ineffeciency in stock pricing which doesn’t add up either !!!
Also correction, only 55% of Refinitiv is 17B bringing full value of Refinitiv to 30B+ which is 5x its annual revenue!!
Again, how the f--- was this deal valued!!!
Interesting topic, viewed at other angle. How on earth a 6B revenue worth 17B almost 3x, does the ROI justifiable? Business growth +/- 1%, PBT or to consider gross profit will be challenged. By the way, did NTA come across your mind?
Anything is only worth what someone will pay for it...the real questions is how does Blackstone see they can get more than $17bn in value from the deal....they have no concerns otherwise would have never closed the deal...